Globally, rising health care cost has increased pressure on individuals, families and organizations to meet their healthcare needs with emphasis on efficiency, equity and access to quality health care. Central to all of these is the focus on alternative source of funding considering the effect of income in meeting health care needs.

Given that illness occurs irregularly and unexpectedly and medical cost are difficult to predict or estimate on an individual basis, a third-party financier such as a health maintenance organization (HMO) play a critical role in financing medical expenditures. This is because, a third-party payer can pool medical risk over a large number of lives, and is in a much better position to predict and manage with greater certainty the financial risk associated with the purchase of medical services.

People prefer the certainty of an insurance cover to the uncertain of sudden financial loss due to illness or medical consumption. They therefore purchase medical insurance and in return benefit through enhanced financial security.